Intrinsic value of Newater Technology - NEWA

Previous Close

$8.24

  Intrinsic Value

$65.71

stock screener

  Rating & Target

str. buy

+697%

Previous close

$8.24

 
Intrinsic value

$65.71

 
Up/down potential

+697%

 
Rating

str. buy

We calculate the intrinsic value of NEWA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  41
  63
  94
  136
  192
  264
  354
  465
  598
  755
  938
  1,147
  1,382
  1,644
  1,933
  2,249
  2,591
  2,958
  3,350
  3,766
  4,206
  4,670
  5,156
  5,665
  6,197
  6,752
  7,329
  7,930
  8,555
  9,204
Variable operating expenses, $m
  31
  47
  71
  102
  144
  198
  266
  349
  449
  567
  704
  861
  1,038
  1,235
  1,452
  1,689
  1,946
  2,222
  2,516
  2,829
  3,160
  3,508
  3,873
  4,255
  4,655
  5,072
  5,505
  5,957
  6,426
  6,914
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  31
  47
  71
  102
  144
  198
  266
  349
  449
  567
  704
  861
  1,038
  1,235
  1,452
  1,689
  1,946
  2,222
  2,516
  2,829
  3,160
  3,508
  3,873
  4,255
  4,655
  5,072
  5,505
  5,957
  6,426
  6,914
Operating income, $m
  10
  15
  23
  34
  47
  65
  88
  115
  149
  188
  233
  285
  344
  409
  481
  560
  645
  736
  834
  937
  1,047
  1,162
  1,283
  1,410
  1,542
  1,680
  1,824
  1,973
  2,129
  2,290
EBITDA, $m
  10
  16
  24
  35
  49
  68
  91
  120
  154
  195
  242
  296
  357
  424
  499
  580
  669
  763
  865
  972
  1,086
  1,205
  1,331
  1,462
  1,599
  1,743
  1,892
  2,047
  2,208
  2,375
Interest expense (income), $m
  0
  0
  1
  2
  4
  6
  9
  13
  18
  24
  31
  39
  49
  60
  72
  86
  101
  118
  136
  155
  175
  197
  221
  245
  271
  297
  325
  354
  385
  417
  449
Earnings before tax, $m
  9
  14
  21
  29
  41
  56
  75
  98
  125
  157
  194
  237
  284
  337
  395
  459
  527
  601
  679
  762
  849
  942
  1,038
  1,139
  1,245
  1,355
  1,469
  1,589
  1,712
  1,841
Tax expense, $m
  3
  4
  6
  8
  11
  15
  20
  26
  34
  42
  53
  64
  77
  91
  107
  124
  142
  162
  183
  206
  229
  254
  280
  308
  336
  366
  397
  429
  462
  497
Net income, $m
  7
  10
  15
  22
  30
  41
  55
  71
  91
  115
  142
  173
  208
  246
  289
  335
  385
  438
  496
  556
  620
  687
  758
  832
  909
  989
  1,073
  1,160
  1,250
  1,344

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  74
  114
  170
  247
  348
  478
  642
  843
  1,085
  1,371
  1,702
  2,081
  2,508
  2,984
  3,509
  4,082
  4,702
  5,368
  6,079
  6,835
  7,634
  8,475
  9,358
  10,282
  11,247
  12,253
  13,302
  14,392
  15,526
  16,704
Adjusted assets (=assets-cash), $m
  74
  114
  170
  247
  348
  478
  642
  843
  1,085
  1,371
  1,702
  2,081
  2,508
  2,984
  3,509
  4,082
  4,702
  5,368
  6,079
  6,835
  7,634
  8,475
  9,358
  10,282
  11,247
  12,253
  13,302
  14,392
  15,526
  16,704
Revenue / Adjusted assets
  0.554
  0.553
  0.553
  0.551
  0.552
  0.552
  0.551
  0.552
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
  0.551
Average production assets, $m
  11
  17
  26
  38
  53
  73
  98
  129
  166
  209
  260
  318
  383
  455
  536
  623
  718
  819
  928
  1,043
  1,165
  1,294
  1,428
  1,569
  1,717
  1,870
  2,030
  2,197
  2,370
  2,550
Working capital, $m
  10
  16
  24
  35
  49
  68
  91
  120
  154
  195
  242
  296
  357
  424
  499
  580
  668
  763
  864
  972
  1,085
  1,205
  1,330
  1,462
  1,599
  1,742
  1,891
  2,046
  2,207
  2,375
Total debt, $m
  24
  46
  76
  117
  172
  242
  330
  438
  567
  721
  899
  1,102
  1,332
  1,587
  1,869
  2,176
  2,509
  2,867
  3,249
  3,655
  4,084
  4,536
  5,010
  5,506
  6,024
  6,565
  7,128
  7,713
  8,322
  8,955
Total liabilities, $m
  40
  61
  91
  132
  187
  257
  345
  453
  583
  736
  914
  1,117
  1,347
  1,602
  1,884
  2,192
  2,525
  2,883
  3,265
  3,670
  4,099
  4,551
  5,025
  5,521
  6,040
  6,580
  7,143
  7,729
  8,337
  8,970
Total equity, $m
  34
  53
  79
  114
  161
  222
  297
  390
  502
  635
  788
  963
  1,161
  1,382
  1,625
  1,890
  2,177
  2,485
  2,815
  3,165
  3,535
  3,924
  4,333
  4,761
  5,207
  5,673
  6,159
  6,664
  7,189
  7,734
Total liabilities and equity, $m
  74
  114
  170
  246
  348
  479
  642
  843
  1,085
  1,371
  1,702
  2,080
  2,508
  2,984
  3,509
  4,082
  4,702
  5,368
  6,080
  6,835
  7,634
  8,475
  9,358
  10,282
  11,247
  12,253
  13,302
  14,393
  15,526
  16,704
Debt-to-equity ratio
  0.710
  0.870
  0.970
  1.030
  1.060
  1.090
  1.110
  1.120
  1.130
  1.140
  1.140
  1.140
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.150
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
  1.160
Adjusted equity ratio
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  7
  10
  15
  22
  30
  41
  55
  71
  91
  115
  142
  173
  208
  246
  289
  335
  385
  438
  496
  556
  620
  687
  758
  832
  909
  989
  1,073
  1,160
  1,250
  1,344
Depreciation, amort., depletion, $m
  1
  1
  1
  1
  2
  3
  3
  5
  6
  7
  9
  11
  13
  15
  18
  21
  24
  27
  31
  35
  39
  43
  48
  52
  57
  62
  68
  73
  79
  85
Funds from operations, $m
  7
  11
  16
  23
  32
  44
  58
  76
  97
  122
  151
  183
  220
  261
  307
  356
  409
  466
  526
  591
  659
  730
  805
  884
  966
  1,051
  1,140
  1,233
  1,329
  1,429
Change in working capital, $m
  4
  6
  8
  11
  14
  19
  23
  29
  34
  41
  47
  54
  61
  68
  75
  81
  88
  95
  101
  107
  114
  120
  125
  131
  137
  143
  149
  155
  161
  168
Cash from operations, $m
  4
  5
  8
  12
  18
  25
  35
  47
  63
  81
  104
  130
  160
  194
  232
  274
  321
  371
  425
  483
  545
  611
  680
  753
  829
  908
  991
  1,078
  1,168
  1,261
Maintenance CAPEX, $m
  0
  0
  -1
  -1
  -1
  -2
  -2
  -3
  -4
  -6
  -7
  -9
  -11
  -13
  -15
  -18
  -21
  -24
  -27
  -31
  -35
  -39
  -43
  -48
  -52
  -57
  -62
  -68
  -73
  -79
New CAPEX, $m
  -4
  -6
  -9
  -12
  -15
  -20
  -25
  -31
  -37
  -44
  -51
  -58
  -65
  -73
  -80
  -87
  -95
  -102
  -109
  -115
  -122
  -128
  -135
  -141
  -147
  -154
  -160
  -166
  -173
  -180
Cash from investing activities, $m
  -4
  -6
  -10
  -13
  -16
  -22
  -27
  -34
  -41
  -50
  -58
  -67
  -76
  -86
  -95
  -105
  -116
  -126
  -136
  -146
  -157
  -167
  -178
  -189
  -199
  -211
  -222
  -234
  -246
  -259
Free cash flow, $m
  -1
  -1
  -1
  0
  1
  3
  7
  13
  21
  32
  46
  63
  84
  108
  137
  169
  205
  245
  289
  337
  389
  444
  502
  564
  629
  697
  769
  844
  922
  1,003
Issuance/(repayment) of debt, $m
  15
  22
  30
  41
  54
  70
  88
  108
  130
  153
  178
  203
  229
  256
  282
  308
  333
  358
  382
  406
  429
  452
  474
  496
  518
  540
  563
  586
  609
  633
Issuance/(repurchase) of shares, $m
  6
  8
  11
  14
  17
  19
  21
  22
  21
  18
  11
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  21
  30
  41
  55
  71
  89
  109
  130
  151
  171
  189
  206
  229
  256
  282
  308
  333
  358
  382
  406
  429
  452
  474
  496
  518
  540
  563
  586
  609
  633
Total cash flow (excl. dividends), $m
  20
  29
  40
  55
  72
  93
  117
  143
  172
  203
  235
  269
  313
  364
  418
  477
  538
  603
  671
  743
  818
  895
  976
  1,060
  1,147
  1,238
  1,332
  1,429
  1,530
  1,635
Retained Cash Flow (-), $m
  -13
  -19
  -26
  -35
  -47
  -60
  -76
  -93
  -112
  -132
  -153
  -175
  -198
  -220
  -243
  -265
  -287
  -309
  -329
  -350
  -370
  -389
  -409
  -428
  -447
  -466
  -485
  -505
  -525
  -546
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  7
  10
  14
  19
  25
  32
  41
  50
  60
  71
  82
  94
  115
  144
  175
  211
  251
  295
  342
  393
  448
  506
  567
  632
  701
  772
  847
  924
  1,005
  1,090
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  7
  9
  12
  16
  20
  24
  28
  31
  34
  37
  39
  40
  44
  48
  52
  54
  55
  54
  53
  50
  46
  42
  37
  32
  27
  23
  18
  14
  11
  8
Current shareholders' claim on cash, %
  93.5
  88.4
  84.2
  80.8
  78.1
  76.0
  74.3
  73.0
  72.1
  71.5
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2
  71.2

Newater Technology, Inc. is a wastewater purification treatment company. The Company is focused on the development, manufacture and sale of disk tube reverse osmosis (DTRO) and disk tube nanofiltration (DTNF) membrane filtration products that are used in the treatment, recycling and discharge of wastewater. The DTRO membrane and DTNF membrane is used to treat and recycle wastewater. The Company also supplies hardware and engineered systems necessary to implement integrated solutions with DTRO and DTNF products. The Company provides engineering support and installation, technical advice and service, and other project-related solutions to filter wastewater into clean water. The company provides services to chemical and energy industries. The Company also offers traditional wastewater treatment solutions, such as activated carbon and resins.

FINANCIAL RATIOS  of  Newater Technology (NEWA)

Valuation Ratios
P/E Ratio 43.7
Price to Sales 7.3
Price to Book 7.9
Price to Tangible Book
Price to Cash Flow -87.3
Price to Free Cash Flow -29.1
Growth Rates
Sales Growth Rate 71.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 100%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio 0.3
LT Debt to Equity 0%
Total Debt to Equity 27.3%
Interest Coverage 0
Management Effectiveness
Return On Assets 13.8%
Ret/ On Assets - 3 Yr. Avg. 9.7%
Return On Total Capital 19%
Ret/ On T. Cap. - 3 Yr. Avg. 14.7%
Return On Equity 26.7%
Return On Equity - 3 Yr. Avg. 22.2%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 41.7%
Gross Margin - 3 Yr. Avg. 28.2%
EBITDA Margin 25%
EBITDA Margin - 3 Yr. Avg. 13.1%
Operating Margin 8.3%
Oper. Margin - 3 Yr. Avg. 12.3%
Pre-Tax Margin 25%
Pre-Tax Margin - 3 Yr. Avg. 13.1%
Net Profit Margin 16.7%
Net Profit Margin - 3 Yr. Avg. 10.3%
Effective Tax Rate 33.3%
Eff/ Tax Rate - 3 Yr. Avg. 11.1%
Payout Ratio 0%

NEWA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NEWA stock intrinsic value calculation we used $25.339497 million for the last fiscal year's total revenue generated by Newater Technology. The default revenue input number comes from 0001 income statement of Newater Technology. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NEWA stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for NEWA is calculated based on our internal credit rating of Newater Technology, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Newater Technology.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NEWA stock the variable cost ratio is equal to 76%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NEWA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Newater Technology.

Corporate tax rate of 27% is the nominal tax rate for Newater Technology. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NEWA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NEWA are equal to 27.7%.

Life of production assets of 34.3 years is the average useful life of capital assets used in Newater Technology operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NEWA is equal to 25.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $20.991288 million for Newater Technology - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 10.809 million for Newater Technology is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Newater Technology at the current share price and the inputted number of shares is $0.1 billion.

COMPANY NEWS

▶ Interim Report New Wave Group AB   [Nov-08-18 01:21AM  PR Newswire]
▶ Juno soars, Newater's Blockchain play, Adient warns   [Jan-17-18 12:55PM  Yahoo Finance]
▶ At $12.22, Is Newater Technology Inc (NEWA) A Sell?   [Nov-08-17 06:49PM  Simply Wall St.]

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